Real estate sector steps up to build social housing projects in Tunisia


Driven by fast-paced urbanisation and strong population growth, the Tunisian housing sector has expanded rapidly over the past decade. While the government continues to have a strong presence within the sector – both in terms of fiscal incentives and land regulations, as well as direct property development – the private sector has become the largest source of residential and non-residential development. Albeit one of the most solid in the region, Tunisia’s housing market has nonetheless been grappling with several challenges in recent years, including rising costs, land and labour shortages, and administrative bottlenecks.

Size & Scope

According to the Ministry of Public Works, Housing and Territorial Development (Ministère de l’Equipement, de l’Habitat et de l’Aménagement du Territoire, MEHAT), the real estate sector contributed 2.3% to GDP in 2014, with an overall turnover of TD1.6bn (€686m). Despite the limited size of the Tunisian market, with a population of 11m, the property development sector is composed of some 3500 private developers, according to the National Association of Real Estate Developers (Chambre Syndicale Nationale des Promoteurs Immobiliers, CSNPI). However, the Centre for Affordable Housing Finance in Africa (CAHFA) estimates only 800 developers are active, while the others are registered primarily to benefit from tax exemptions. Only 20 of them are large-scale developers, with development capacity of 100-200 units per year. “The predominance of self-builds and the significant number of small-sized players have prevented the sector from undergoing consolidation, achieving economies of scale and acquiring technological innovation, which in turn has contributed to keeping construction costs particularly high,” Fahmi Chaabane, president of CSNPI, told OBG.

Government Role

The Tunisian government has long been the main player in the sector. In the decades following Tunisia’s independence, the government attempted to improve access to housing through three main institutions. Created in 1957, the state-owned Société Nationale Immobilière de Tunisie (SNIT) remains today the main public real estate developer, having produced 260,000 units between 1957 and 2012. In 1973 the Housing Land Agency (Agence Foncière d’Habitation, AFH) was established to supply land plots and foster urbanisation, making some 77,000 plots available between 1973 and 2014. In 1977 a third public entity, Société de Promotion des Logements Sociaux (SPROLS), was created to promote the development of social housing options for those within the social security system. SPROLS offers housing options at prices 25-30% below those offered by other companies.

The state-owned Banque de l’Habitat remains the main mortgage lender and also grants specific loans to authorised property developers, financing up to 80% of the total cost of a social housing project at an annual rate of 6.78%, and up to 70% of commercial or high-end projects at 7.28% and 8.28%, respectively, according to CAHFA. Reimbursement is guaranteed through special financing schemes that are aimed at homebuyers. Credit risks on property developments have been on the rise, with non-performing loans standing at 15% at the end of 2013.


Since the 2000s, shortage of land has become the main bottleneck for the development of real estate projects, affecting particularly high-end areas in major urban centres such as Tunis. Most urban developments between the 1970s and 1990s were constructed on public land, leading to a progressive decrease in availability. As a result, the number of publicly developed plots has fallen significantly, with only 35 ha released by the AFH per year for self-builds between 2010 and 2012, the equivalent of just over 1000 housing units and less than 5% of approved lots, according to MEHAT.

Developers have therefore had to turn to the private market, where they continue to face several challenges, including steep competition for limited plots, a complex land tenure regime, limited land titles and profound fragmentation. Combined with speculation and poor urban planning, this has resulted in an increase in the price of land by nearly 10% annually over the past decade. “Today land costs account for between 30% and 40% of any housing project’s cost, compared to 15-18% before the 2011 revolution,” Chaabane told OBG.


In 2015 Tunisia’s housing stock stood at roughly 3.3m units, with an ownership rate estimated at 77%. According to MEHAT, housing sector production was estimated at nearly 60,000 units in 2014, having grown by an average of 2.2% per year between 2009 and 2014. Meanwhile, annual demand is estimated at 77,000 units currently. The majority (80%) of new production was self-builds, which is generally the most affordable option, with private and state-backed property developers responsible for 18% and 2% of housing construction, respectively. Many of the self-build units are informal, with roughly one-third of total new constructions falling under that category. “The inefficiency of urban planning policies has resulted in a laissez-faire approach towards informal housing, with development accelerating in recent years due to an insufficient supply of social housing units,” Chaabane told OBG. “Authorised developers cannot compete with the informal sector, as they have to grapple with lengthy administrative procedures regarding lot-sizing, commercialisation or building permits.”

In keeping with the country’s high coastal urbanisation, most new development occurs along dense urban corridors. The Greater Tunis area accounts for two-thirds of housing developments, followed by the governorates of Bizerte and Nabeul (16%), and Sousse, Monastir and Sfax (19%). By contrast, inner cities such as Gabès, Kasserine or Sidi Bouzid have experienced no significant real estate development.

During the post-revolution years, production by private property developers began to fall substantially. Between 2014 and 2016, an average of 8000 housing units were built annually, compared to 14,000 in 2010, according to the National Federation of Construction and Public Works Entrepreneurs (Fédération Nationale des Entrepreneurs de Bâtiment et des Travaux Publics, FNEBTP). The drop in construction activity was driven by rising costs for land, labour and building materials. This has increased pressure on developer’s margins, prompting them to shift production towards the mid- to higher-range segments, which represent roughly three-quarters of their portfolio today.

The shift comes despite the fact that the majority of demand for new units – as much as 70%, according to the FNEBTP – is at the lower end of the market. Foreign buyers, who might help soak up demand at the higher end of the segment, have faced challenges in acquiring property. “It has become virtually impossible for foreigners to acquire property in Tunisia since the revolution, due to the requirement to get an authorisation from the governor,” Chaabane told OBG. “Before the revolution, the procedure took between three to six months on average, but now in practice this has been extended to three years. Therefore, we are calling for the removal of this authorisation as a way to re-boost sales of properties in the market,” Chaabane said. In 2016 the requirement for authorisation from a governor for the acquisition of property by Libyans was removed – as part of the enforcement of a bilateral agreement signed between Tunisia and Libya in 1961 – but has yet to be implemented.


Perhaps unsurprisingly, property has maintained its safe haven classification amidst the broader turbulence of Tunisia’s post-revolution era, which, along with higher construction costs, has supported a continued rise in prices. While property prices had already been increasing at an average of 8% since the 1990s, according to CAHFA, this has accelerated since 2011. According to SNIT, prices currently hover between TD600 (€257) and TD900 (€386) per sq metre, compared to TD400 (€172) in 2011. For the Greater Tunis area, the price per sq metre rose to between TD800 (€343) and TD1200 (€515), with peaks of TD5000 (€2140) in high-end areas such as the Lac de Tunis.

Rising demand, in part a result of the influx Libyan migrants, has also helped drive rents up significantly. According to the National Institute of Statistics, rents rose by an average of 5.6% and 7.7% in 2014 and 2015, respectively, outpacing inflation. “The rise in real estate prices has also been fuelled by speculation over land and properties,” Chaabane told OBG. “In a context of rising insecurity, social upheaval and political instability, the real estate sector has been increasingly perceived as a safe haven for many Tunisian households and investors.”

According to CAHFA, the surge in housing costs has significantly outpaced wage increases in recent years. Housing represents the second-largest expense for Tunisian households, with average housing prices currently equivalent to five times the median annual income. “The volume of sales has stagnated in recent years as homebuyers’ revenues have not kept pace with the rising costs of construction,” Chaabane said. “To help lower property prices, authorities should implement a more favourable tax system, speed up administrative procedures and make more public land available. Otherwise, private developers will keep struggling to offer affordable housing and compete with informal activity.”

Access To Finance

One of the main factors behind the low level of property sales is limited access to financing, a challenge common throughout the region. The value of retail housing loans to Tunisians stood at TD7.97bn (€3.4bn) in September 2015, according to the central bank, representing 43.9% of total outstanding retail bank lending to individuals. The largest mortgage lender, the stateowned Banque de l’Habitat, accounts for approximately 20% of loans to homebuyers. The bank held a monopoly over the housing finance sector until 2001, when it was deregulated. Private banks have since begun moving into the increasingly competitive housing segment, with Amen Bank and the Banque Internationale Arabe de Tunisie being today the two main private mortgage lenders. The three institutions account for some 60% of market share.

However, activity remains subdued, with the purchase of property hampered by several structural factors, including low banking penetration, land title issues, a high volume of informal builds and slow lending by banks (see Banking chapter). The structure of mortgages makes them challenging to pay back, with most banks offering 10-15-year floating rate loans, capped at 80% of the value of the property. “This poorly diversified mortgage offer is mainly the result of a decision taken by the Tunisian central bank to impose fixed interest rates for retail loans over 15 years, discouraging banks from offering long-term lending,” Chaabane explained. “Short loan periods have automatically resulted into higher mortgage carrying costs and contributed to the exclusion of a large chunk of Tunisia’s middle-class.”

The government has attempted to expand access to credit for middle- and lower-income households primarily through the Fonds de Promotion du Logement pour les Salariés (FOPROLOS). Created in 1977, FOPROLOS aims to provide housing finance for low-income groups via a 1% tax on wages, offering 25-year loans with interest rates ranging between 2.5% and 5.75%. Despite the preferential terms, between 2009 and 2013 only 725 housing units, at a value of TD90m (€38.6m), were funded by FOPROLOS, due to the fact that loan ceilings have not kept pace with purchase costs. “To foster the acquisition of property among Tunisians, it is vital to further ease the lending supply and offer more affordable lending options, including the possibility for banks to fund up to 90% of the property,” Chaabane said.

Social Housing

As a result of high land prices and the limited availability of mortgages for lower-income households, demand for affordable and social housing has increased in recent years, as the production pipeline for lower-income units has slowed. The vast majority of social housing projects were carried out by public developers SNIT and SPROLS, which together produced some 4000 units annually through the 1990s. Since then, however, that figure has decreased significantly.

This has also not been offset by private developers, which were responsible for the production of only 400 social housing units per year over the past five years. “Tunisia’s social housing model was initially built on the availability of public land. However, the rise in land prices has narrowed developers’ margins and made the development of social housing projects – where fixed prices stand below construction costs – impossible,” Chaabane told OBG.

In a bid to make loans more affordable for housing units at the lower end of the market, authorities have introduced new tax benefits. In effect since January 2016, the fiscal changes enable first-time homebuyers and loan-holders to deduct interest rates on mortgages or loans for the acquisition or construction of homes with a value not exceeding TD200,000 (€85,700). In 2012 the MEHAT launched a €45m programme aimed at building 30,000 social housing units, though by the end of 2015 only 2000 units had been built. The ministry subsequently announced new plans to build between 6000 and 10,000 new social housing units annually from 2016 to 2020. According to local press reports, SNIT plans to build 1300 housing units in 2017, while SPROLS will build between 500 and 600 units.

Growth Drivers

For decades, tourism was one of the main drivers of growth in the property development sector, representing up to 30% of the sector’s turnover through the 1990s. However, a mature sector, combined with a decrease in visitors, has seen that figure slide significantly (see Tourism chapter). There are a number of large-scale mixeduse projects currently in the pipeline, although some have seen limited progress in recent years due to issues related to property ownership and development plans. In 2008 Emirati developer Sama Dubai, a subsidiary of Dubai Holding, unveiled plans for La Porte de la Méditerranée, a new $25bn city set to accommodate 250,000 inhabitants on 1000 ha south of Tunis, for example. Though ground has yet to be broken, in late 2016 local media reported the project was being re-launched.

One of the largest projects in the pipeline is the Tunis Sports City, by UAE-based Bukhatir Group on the northern shores of the Lac de Tunis. Spanning 255 ha, the $5bn project includes the construction of nine large-scale sports facilities, including a 10,000-seat outdoor stadium and a 5000-seat indoor stadium, as well as 30,000 housing units. The project was put on hold in 2012, after the Emirati group requested to replace part of the sports infrastructure with new housing developments. The area’s master developer, the joint Saudi-Tunisian venture Société de Promotion du Lac de Tunis, has yet to agree to the changes.

Another major development is the Tunis Financial Harbour, on the northern suburbs of Tunis. A partnership between Bahraini investment bank Gulf Financial House and Tunis Bay Development Company, the $3bn project is set to include office space, residential units and leisure facilities, spread over a surface of 523 ha in Ariana. After being put on hold in 2011, due to ongoing litigation to establish eminent domain over the building site, local authorities announced in April 2016 that the project was also being re-launched. By the end of 2016 the first and second phases, of a total of four phases, were nearing completion. A number of other projects, also funded by Gulf developers, are in the works. Emirati holding company Majid Al Futtaim has announced plans to develop the City of Congress in El Bouheira starting in 2017. Spanning over 9 ha, the project will include a 5000-seat conference centre, a 600-bed hotel and several mixed-use facilities.


Limited land availability appears set to continue to put upward pressure on land prices, which, along with rising labour and building material costs, is likely to increase pressure on developers’ margins. With construction costs outstripping property price ceilings for social housing units, most developers are catering to the mid- to higher-range segments. However, authorities are keen to re-energise the social housing sector with the introduction of new tender bids. This, in addition to the implementation of the Tunisia 2020 strategy, which prioritises the sector, could see an increase in activity in Tunisia’s real estate sector in 2017.

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The Report: Tunisia 2017

Construction & Real Estate chapter from The Report: Tunisia 2017

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